Home planning and proper funds

Almost 90% people depend on home loans for fulfilling their dreams of a home of their own. The interesting fact is that most people seeking home loans know about documentation and contracts related to home loans but do not most of their technical terms, which are most important factors about these loans. These may cost you dearly if you are caught unaware at a later stage due to lack of knowledge of these technical terms. Let us discuss some of these here for the benefit of loan seekers from different financial institutes for their homes.

Processing Fee

The process begins with an application form that needs a processing fee paid by applicant at the time of applying for a home loan. 

Equated Monthly Installment

It is one of the most important factors of your home loan, which is set according to amount of loan and tenure of your home loan.  EMI as the term is popularly known is the amount consists of principal and interest combined that you pay to your financial institute every month. You must be very careful while agreeing to tenure because it is the basic of fixation of EMI, which should be within your monthly budget. Please read these points carefully, which you may not have given importance to otherwise. 

LTV and LCR

LTV stands for loan to value ratio and LCR means loan to cost ratio, terms used by financial institutes, which denote the maximum amount of loan allowed to applicant according to valuation of property proposed and his worth.  

Incidental charges

Incidental charges or IC basically a penalty imposed by financial institute on the person who does not pay his EMI within stipulated time or as fee in lieu of installment collector ‘s visit  This penalty varies from institute to institute written in fine print but not taken seriously.

No objection certificate 

Sounds a very common word but in case of a home loan used when the person is not clear owner of the property/land against which the loan applied for construction purpose. The financial institutes seek a ‘no objection’ certificate issued by housing board, builder or any other development authority that holds the proprietary rights of the land. The institutes do it especially in case of no clear ownership or leased lands.

Pre-EMI

Also known as, PEMI is interest amount payable while a partial amount is released by financial institutes, as no full amount of loan sanctioned is released at a time but according to construction work complete. Once the amount is released, the repayment or EMI begins as per stipulated terms known as PEMI.

Pre Payment Charges

Most people would be surprised to know that if a person wants to clear his debts before its stipulated time, he must pay prepayment charges known as pre payment penalty. Financial institutes impose this penalty because they incur losses on interests, which they would earn if the loan amount paid as per pre-set conditions. This penalty may differ according to rules as defined in fine print, which normally no one reads at the time of applying for loan or signing agreement papers.  

Post-Dated Cheques 

Most institutes demand post-dated cheques for different periods according to tenure of the loan, starting from one year to entire period. This saves creditor as well debtors from depositing EMI every month but in case a cheque fails to clear could create problems for consumer. The new rule says that a cheque dishonored can result in charges of a criminal case with no bail provisions. Therefore the account holder must be very careful to see to it that his account has enough account to clear the cheque every month to save from different problems like extra interest and legal problems.

Conclusion

You should go ahead with you home plans while you are 100% sure about your job and source of income so that you do not have to suffer from unnecessary problems in case you face an unemployment or health related problem. You must have a backup plan to pay your EMI to avoid legal or financial problems.Incidental 


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